Wednesday, November 4, 2020

Debt Relief Options for Consumers

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Credit Counseling vs. Debt Relief

Credit counseling is a good alternative to filing bankruptcy. It's designed to help consumers experiencing financial difficulties, and are unable to make their minimum payments.

Debt Consolidation is also a better alternative vs. bankruptcy. In this scenario you, or a third party re-negotiates your interest rates and monthly payments based on your credit score, income, and budget.

Debt relief advisors provide credit counseling for multiple types of debt:
  • Credit card debt consolidation
  • Unsecured debt consolidation
  • Home mortgage payment
  • Online credit counseling
  • Business debt consolidation

A debt advisor will hopefully help you create a plan to become debt-free within five years.

Some consumers feel obligated to pay back the entire balance on unsecured debt (i.e. credit cards) even when under the most extreme crises. If you’re one of those people and want help regaining control over your finances, an unsecured debt consolidation may just give you the peace-of-mind you’re searching for.

Consumer Credit Counseling

Consumer Credit Counseling organizations act as an intermediary between you and your creditors. However, debt consolidation only reduces the interest rates and fees on your debts, not the balance themselves.

By reducing these fees and interest rates, getting out of debt is possible in about 4-5 years. However, you will end up paying the full amount plus and possibly some interest.

Debt consolidation usually requires a higher monthly payment, whereas  with most Debt Negotiation programs it likely won't be the case. 

When evaluating consumer credit counseling organizations, check to see if the organization is a for–profit or non-profit company.

Non–profit credit counseling organizations are sometimes funded by the credit card companies that you're making payments to. This can create a conflict of interest, so make sure that the credit counseling organization is NOT collecting fees from both you and your creditors.
Debt Consolidation is a good option for some people, particularly those who can afford a higher monthly payment.

Read how debt parking effects your credit score.

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